Blockchain Technology’s 3 Generations
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Blockchain technology has evolved dramatically since its inception with Bitcoin in 2009. The technology has undergone significant transformations, with each generation building upon the last to address its predecessor’s limitations.
This evolution has expanded blockchain’s potential applications beyond cryptocurrency, touching industries from finance to healthcare to supply chain management. Understanding the three distinct generations of blockchain technology is thus crucial for grasping its capabilities and potential. Let’s explore how blockchain has progressed from a simple distributed ledger to a platform for complex, interconnected ecosystems.
Key Takeaways
- The ideas, concepts, and programming that make up a blockchain took decades to develop.
- Blockchain is the technology behind cryptocurrency, but cryptocurrency came to the forefront for the better part of a decade.
- Aside from its uses in crypto, blockchain has been explored for creating a decentralized internet, as well as for commercial applications.
- Potential future uses of the blockchain include tracking in supply chain management and other forms of asset management.
Generation 1: Development and Introduction
The ideas that would go into blockchain have been swirling around in computer science communities since the late 1980s. The blockchains we are familiar with today are the culmination of decades of research and development by many people who will likely never be recognized for their contributions. Here are a few of the ideas and concepts involving blockchains, conceived of and proposed by many individuals prior to Bitcoin:
Many of these began being used together in the late 1990s to try to create distributed payment systems. Many failed projects ultimately led to Bitcoin, so this generation represents the work from before 2009.
Generation 2: Cryptocurrencies
The second generation, when blockchain was centrally identified with crypto, marks the period between 2010 and 2022.
Bitcoin introduced cryptocurrencies to the world, and it caught on very quickly. Many projects since have attempted to address issues the Bitcoin blockchain underwent.
Ethereum appeared in 2015, bringing with it not only a cryptocurrency but the idea that blockchain could be used to decentralize other aspects of financial life. It can host applications and smart contracts.
As the market value of cryptocurrencies fluctuated wildly and investors began speculating on their prices, new cryptocurrencies emerged. These were introduced to raise funding for developers trying to capitalize on the increasing interest and money flowing in.
Initial coin offerings flooded the market with new cryptocurrencies, and more capital poured in. The blockchain and cryptocurrency industry was soon a space that threatened to be overtaken by scams and frauds. The cryptocurrency market entered a “crypto-winter” in 2018, only occasionally seeing a rise in prices following hype by celebrities and well-known names in the space.
Crypto regained much of its previous popularity between 2023 and 2024, hitting new price highs, based on the approval of spot crypto ETFs.
Generation 3: Enterprise Adoption and Web3
During the cryptocurrency craze, blockchain development continued as projects worked to attract interest from businesses and governments. Development of enterprise uses, long evangelized by blockchain proponents, accelerated as researchers, financial institutions, and large companies worked on solutions to problems they experienced.
Walmart Inc. (WMT) created a supply chain tracking platform based on a blockchain network, and the Linux Foundation created a modular blockchain on which users could build customized blockchains for their needs. International Business Machines Corporation (IBM) used the Linux Foundation’s technology to further develop business products, and JP Morgan Chase (JPM) launched a commercial, customizable blockchain for businesses.
Web3 is still in its concept phase, but it’s emerging alongside AI and machine learning as the source of major new technological advances.
Some projects were still launching cryptocurrencies in 2023 and 2024, but many cryptocurrency projects founded in the 2010s overhauled their blockchains, attempting to become more relevant as the crypto storm calmed. Web3, the idea of restructuring how the internet works through decentralization, became the focus of blockchain-based projects.
The idea behind Web3 is to use blockchain, distributed ledgers, tokens, and cryptocurrencies to create an internet that removes intermediaries. A person’s data should remain within their control and only be used for marketing or other purposes if purchased first directly from them—not from a business that collected it without that person’s knowledge. One’s intellectual property and creations can belong to someone through tokenization; financial transactions can be conducted without relying on institutions that use one’s money to make money for themselves, and much more.
Thus, the third generation began in 2023, when many existing blockchain and cryptocurrency projects began switching to Web3. There were Web3 blockchain projects before then, but it became the focus as cryptocurrency moved to the development background.
Generation 4: The Future
The third generation of the blockchain is still young, but some have already turned their focus to the next generation of blockchain technology. Many expect the fourth generation of blockchain development to focus on business applications, allowing companies to run decentralized applications.
Goals include improvements around scalability, user experience, and interoperability. Potential applications of the next generation of blockchain technology include real-time goods tracking for supply chain management, secure storage of records, enhanced security for voting and elections, as well as other industrial and consumer uses.
How Many Generations of Blockchain Are There?
Really, there have been three so far: research and development, the cryptocurrency craze, and Web3 and enterprise development. Some proponents of the technology are now looking forward to the fourth generation of blockchain technology.
What Is the 5th Generation of Blockchain?
Some people refer to specific blockchain developments as generations, such as Bitcoin (first, only a payment method), Ethereum (second, a payment method, app development, and smart contracts), and so on. A fifth generation blockchain, under this definition, would have all the features of earlier blockchains plus applications in AI, supply chain management, and more.
What Are the 4 Types of Blockchains?
Blockchains are popularly thought to come in two types and two subtypes: public (decentralized, permissionless networks), private (networks controlled by a single organization), consortium or federated (blockchains where multiple organizations share control over the network), and hybrid blockchains (where data is split between public and private).
What Gives Cryptocurrency Value?
Cryptocurrencies are a significant part of blockchain technology, and some, like Bitcoin and Ethereum, have ample market value. This value comes from the fact that they are scarce and can be used in financial transactions. Much of the value also comes from speculation, as people who believe in the value of a cryptocurrency are willing to pay high prices, believing that its price will continue to rise.
What is the Difference Between a Blockchain and Cryptocurrency?
Cryptocurrencies are digital tokens that people can hold or transfer. Some cryptocurrencies have value and can be used as a store of value. Cryptocurrencies rely on blockchain technology to track transactions.
The Bottom Line
Blockchains took many years to evolve into what they are today: large distributed networks that facilitate payments, allow applications to be created on them, use automation to complete agreements between parties and serve as the basis for smart contracts.
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